Why Innovation in Circular Economy Is Important

Three main areas have emerged which have brought this opportunity into sharp focus:

1. Trends furthering the case for resource efficiency include:

(a) Risk factors around resource availability and price volatility

(b) Increased public opinion and government regulation concerning environmental and social issues

2. The opinion that traditional resource efficiency measures are insufficient to address current resource challenges

3. The alignment of conditions which will allow for the rapid diffusion of the circular economy such as:

(a) The introduction of policies and regulations of governments around the world that support and promote the circular economy

(b) Changing customer/consumer attitudes and other societal shifts that are essential for the diffusion of circular economy

(c) The advancement of information technologies and other technologies which drastically increase the feasibility of circular economy.

Each of these drivers will be discussed in turn:

Resource Availability

As of 2015, sharp price increases in commodities since 2000 have erased the real price declines of the twentieth century. At the same time, price volatility levels for metals, food and non-food agricultural output in the first decade of the twenty-first century were higher than in any single decade in the twentieth century (McKinsey Global Institute 2013a). Extended producer responsibility is ever more important to public sector purchasing and individual consumption of durable and food goods. The Guardian Sustainable Business pages list climate change, supply chain responsibility, conflict minerals and factory workers' rights in their top 10 issues of 2014 (Buckingham 2014).

Resource Efficiency

In modern manufacturing processes, opportunities to increase efficiency still exist, but the gains are largely incremental and unlikely to generate real competitive advantage or differentiation. The latest IPCC report determined that the global emissions of greenhouse gases have risen to unprecedented levels, despite a growing number of policies to reduce climate change. Emissions grew more quickly between 2000 and 2010 than in each of the three previous decades (IPCC 2014). With three billion new middle class consumers expected to enter the market by 2030, current efficiency measures will not be enough to meet this demand.

Alignment of Conditions

Conditions for rapid diffusion are aligning. The IT sector and many other industries see increasing regulation being developed that moves beyond eco-efficiency into new forms of producer responsibility. The early adopters will be the ones to find competitive advantage and exponential growth. The millennial generation are more likely to demand access to services over ownership of products, for example through subscription services like Netflix or mobility access through car leasing (Ross 2014). Big data and data analytics helps companies to drive business growth by moving from 'transactions' to 'relationships' with their customers. This in turn drives increased brand loyalty, a concept which is well understood as valuable to industry via models such as Net Promoter Score (Reichheld 2003).

Having described circular economy principles and why HP thinks it is important for future business success, the remainder of this chapter will examine the real, atscale programs currently underway at HP. These will demonstrate how a major multinational company like HP can build on its long-held resource efficiency principles to profitably drive industry forward in the circular economy.

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